1.
The Price of Tattoos. According to a market expert, tattooing in your city is a constant-cost industry. The initial equilibrium price is $24.
a. Arrows up or down: In the long run the wage of tattoo artists
as industry output increases.
b. If the demand for tattoos doubles and stays at the higher level for 3 years, the price of tattoos 3 years from now will be $
.
c. Show the change in (b) using a supply and demand graph.
2. For a monopolist, marginal revenue is
(greater/less) than price.
3. A monopoly that cuts its price gains revenue from its
customers but loses revenue from its
customers
4. At a price of $18 per CD, a firm sells 60 CDs. If the slope of the demand curve is - $0.10, marginal revenue for the 61st CD is $
. The firm should cut the price to sell one more CD if the marginal cost is less than $
.
5. Arrow up or down: As the quantity produced by a monopolist increases, the gap between the marginalrevenue curve and demand curve
.
6. When a firm is awarded a patent, it is given monopoly rights to the production of that product for
years.
7. Arrows up or down: At a price of $18 per CD, the marginal revenue of a CD seller is $12. If the marginal cost of CDs is $9, the firm should
its price to
the quantity.
8. Facebook is a social networking Web site that is used by a growing number of individuals. Because of its popularity, it is now more difficult for new networking Web sites to enter the market and compete with Facebook. Facebook enjoys a
as a barrier for others to enter the market.
9. The marginal cost of an additional baseball fan is zero, so the profit-maximizing condition simplifies to .
(Related to Application 1 on page 570.)